Royal Bank of Scotland (RBS) has partnered with online lending marketplace, Funding Circle and peer-to-peer lending platform, Assetz Capital to provide alternative sources of finance to small businesses.
From next week, RBS customers in Scotland and south-west of England that are turned down for loans by the bank will be referred to Funding Circle and Assetz Capital as an alternative way of obtaining a loan. The partnership indicates the growing acceptance of digital crowdfunding within mainstream finance and the willingness of banks and start-ups to work together to benefit customers.
“It is great to see companies like Funding Circle forging a new partnership with RBS to ensure that small British companies have the best access to funding,” said George Osborne, Chancellor of the Exchequer.
Peer-to-peer lending has grown rapidly over the years and in Britain alone was worth £1.7bn last year. These new services allow investors to lend directly to businesses and individuals via low-cost online platforms. Both Funding Circle and Assetz Capital enable businesses to lend funds to each other online, without needing to go through traditional banks.
RBS provides a third of all lending to small and medium-sized enterprises (SMEs) in Britain and said that it expects to advise thousands of businesses to contact Funding Circle and Assetz Capital. According to the bank, peer-to-peer lending currently makes up around one per cent of new SME lending but is growing at 200 per cent a year.
The RBS referral scheme, which plans to expand nationally over the next three months, comes ahead of government plans to make referrals compulsory due to criticism that Britain’s largest banks are failing to provide sufficient credit to the sector. “A key part of our long-term economic plan is to ensure that British businesses are able to access the finance they need to grow and succeed,” said Osborne.
Funding Circle, which was launched in 2010 and received £40m funding from the government last year, has enabled more than 7,000 businesses to borrow £490m and is now the fourth-largest online lender to small businesses in Britain. “Partnering with the UK’s biggest small business high street lender is a huge vote of confidence in our model, and we look forward to working together to create thousands more opportunities for small businesses to access finance and grow," said Samir Desai, CEO and co-founder of Funding Circle.
RBS isn’t the first bank to work with Funding Circle, Santander also struck a similar referral deal with the UK start-up last year.
By Nicole Miskelly, bobsguide Lead Journalist